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A little competition goes a long way in driving down exchange-traded funds' management fees. But there's a different dynamic at work in the small but fast-growing niche of actively managed ETFs. Unlike their passive, index-tracking brethren, these funds try to beat a benchmark using what are often complex and highly specific strategies. As a result, they'll be less vulnerable to copycats cutting prices. They could even enjoy pricing power that's closer to mutual funds. The trend is muddying what used to be a clear distinction between low-cost ETFs and costlier traditional fund options.

Take last week's closely watched launch of Bill Gross'
Pimco Total Return ETF
(ticker: TRXT), the exchange-traded version of the $252 billion
Pimco Total Return
fund (PTTRX). The fund's 0.55% expense ratio is priced to undercut the retail shares of the flagship bond fund, which cost 0.85%, but not the mutual fund's institutional shares, which charge 0.46%. That's no danger to the bulk of Pimco's business, which is institutional, and it's an opportunity for smaller investors seeking to park money with Mr. Gross at the lowest cost yet. But the fund is one of the more expensive nonleveraged bond ETFs focusing on the U.S. Investors still need to weigh how much they value Mr. Gross' strategy over what they can get from the most popular passively managed bond ETFs, which cost in the range of 0.11% to 0.22%.

Noah Hamman, chief executive of AdvisorShares, which runs a number of actively managed ETFs, says he takes Morningstar's mutual-fund category averages into account as he prices his active-ETF offerings. "We feel like if we are at or below that Morningstar category average, and we can do it with a brand new fund, that's a competitive thing," he says. The result is products like the $132 million
Active Bear ETFHDGE 0.5514705882352942%AdvisorShares Ranger Equity Bear ETFU.S.: NYSE Arca10.94
0.060.5514705882352942%
/Date(1425419990674-0600)/
Volume (Delayed 15m)
:
61619
P/E Ratio
N/AMarket Cap
N/A
Dividend Yield
N/ARev. per Employee
N/AMore quote details and news »HDGEinYour ValueYour ChangeShort position
(HDGE), whose managers seek candidates to sell short. The fund's management and operational expenses are capped at 1.85%, a bit lower than the Morningstar "bear market" category average of 1.91%.

Many more actively managed exchange-traded funds are on the way, further blurring the rules on costs. Charles Schwab has filed with regulators to run actively-managed ETFs. An S&P Capital IQ analyst, Tom Graves, has predicted that some actively-managed ETFs could actually have the power to raise fees once they gather assets. AdvisorShares' Hamman doesn't buy it. "We feel like when we get bigger, the fund should be able to get more competitive from a price perspective," he says.

IT'S NOT TRUE THAT EVERY conceivable ETF investing niche has been filled. Here's one: an ETF to track the overseas arms of major multinationals, whose stocks have tended to beat both the local market and the globe-spanning corporations with which they're affiliated, all without much volatility.

Yale University's K.J. Martijn Cremers found in a study sponsored by Aberdeen Asset Management that the subsidiaries and affiliates of major multinationals whose stocks are traded on emerging-market exchanges, like
Wal-Mart de Mexico
(WMMVF), gained an annualized 27.4% over the period 1998-2011. That's more than twice the parent companies' 13.3% and also ahead of the local stock markets' 21.5%. Cremers also found that these stocks' annualized volatility was only a shade higher than the parent companies and lower than the local market.

Cremers was able to identify 92 such companies, which would be more than enough for an ETF–or two.